Does anyone remember the classic board game Risk? I had a good childhood friend who loved to play this game. It required a lot of patience, strategy and a good sense of timing – I could never get the hang of it. (Then Atari came along – forget about it!)
Fast forward 30 years. In the course of writing this blog, I’ve had many discussions with actuary friends. Time and time again, these same themes keep popping up: de-risking tactics take time to develop, a careful strategy must be employed and timing of your action can greatly impact the results.
I’m sure these guys would have dominated me at Risk.
In an earlier post, Helping DB Plan Sponsors Sleep at Night, I discussed several ways in which DB plan sponsors can manage their risk. Below, I’ll provide more detail on each option. You can see that patience, strategy and timing all come into play.
As I’ve mentioned in my previous posts, it’s important to remember when considering a de-risking strategy that while each option may reduce risk, they don’t reduce cost. Risk reduction/management does not equal cost reduction. In fact, many of these strategies come at a premium.
A careful analysis should be done for any DB plan sponsor who considers any of these options to make sure it meets their unique needs. I’d love to hear your thoughts on these options and whether or not you agree with my analysis above.
In addition to blogging here, I also tweet regularly about DB topics of interest. Click to follow me on Twitter- @scottruba.
Asset allocation/diversification does not guarantee a profit or protect against a loss. Use of DAA and/or any glide path does not guarantee improvement in plan funding status nor the timing of any improvement.
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